This week's hostile take-over bid by France's second-largest bank, Banque Nationale de Paris (BNP), for the country's fourth and fifth-biggest banks has left the French government and financial world gasping for breath. If the pounds 30bn three-way merger goes ahead - and that must still be open to doubt - it would be the largest financial transaction in French history and the second largest in the history of world banking.
Overnight, it would give the French banking industry - traditionally weakened by moderate size and government interference - one of the largest private banking groups in the world. The new bank would be the largest in Euroland and the third largest in the EU.
The startling offer by BNP - as if NatWest and Barclays had agreed to merge and Lloyds TSB stepped in to buy both - shattered several French taboos at one stroke. There was no consultation between the top-brass of the companies (as there had been when the target banks, Societe Generale and Paribas agreed amicably to join forces last month). There was no consultation with the government, which is now threatening to intervene. There was no consultation with the powerful banking unions.
To this extent, the proposed merger is an example of the march of tougher Anglo-Saxon attitudes through the cosy and corporatist world of French business. This is the first hostile takeover bid in the French banking industry but it is certainly not the first in France in recent years. It is also a further example of how the coming of the euro, and the lowering of barriers to financial services in the EU, are forcing the restructuring and rationalisation of the European banking sector.
Looked at another way, however, there is something more classically French about BNP's approach and its motives. The BNP director-general, Michel Pebereau, seems to be more interested in size and empire-building for its own sake than rationalisation or efficiency or shareholder value.
He promises to create a French bank of global scale, which would be capable of competing succesfully in Euroland and the world. Economies of scale, however, would mostly be found by merging the three banks' computer networks and possibly their headquarters.
There would be be no closure of high street banks, even though BNP and Societe Generale branches stand side by side in small towns all over France. Paribas is a commercial bank but also has regional and local offices which would, it is promised, remain unscathed. There would be no enforced redundancies.
Mr Pebereau, 58, is not an entrepreneur in the Anglo-Saxon sense. He is an archetypical French bureaucrat and business manager: a high graduate of the ENA elite finishing school for civil servants, a former chef de cabinet at the finance ministry.
His curriculum vitae is similar to those of other ENA graduates who brought such misery to French state-owned enterprises, such as Elf and Credit Lyonnais in the 1980s and early 1990s.
His declared motives - the creation of a French banking champion of global importance - are the same as those which drove Credit Lyonnais to a series of grandiose schemes and breathtaking losses, for which the French taxpayer is still footing the bill.
Unlike that unhappy dirigiste experiment, the proposed Gallic banking giant would be privately owned and would be placing private capital at risk. The root problem with Credit Lyonnais - a French version of the Savings and Loans scandal in America - was that the bank's exceutives were allowed, or even encouraged, to speculate with public or publicly guaranteed funds.
The main driving force behind the double BNP bid is France's most succesful private financial institution, the insurance group AXA - the second largest insurance company in the world and the new sponsor of the FA Cup.
Claude Bebear, President of Axa, which owns a large chunk of both BNP and Paribas, is said to see the new super-bank as the vehicle that can drive French capitalism into the 21st century. Mr Bebear, who is a more Anglo-Saxon type of businessman, expects to be riding in the back- seat of this limousine, calling at least some of the routes and destinations.
Despite his civil service background, it is Mr Pebereau who is taking the bigger risk. If he fails, he is likely to lose his job. His four previous attempts to take over smaller French banks have failed.
The double bid for the other banks - it would be an "association" of equals, he claims, not a takeover - gives Mr Pebereau the satisfaction of scrambling the plans of the Finance Minister, Dominique Strauss-Kahn. The finance ministry had, in the traditional corporatist fashion, warmly welcomed the Paribas-SG merger, which left BNP in the cold. Mr Strauss- Kahn seemed to be doing little to help BNP in its ambition to take control of part of Credit Lyonnais when it is finally privatised later this year.
Now, Mr Strauss-Kahn, the most Blairist and reconstructed of French socialists, faces a dilemma. At one level, the BNP proposals offer him just what successive French governnments have wanted: a French bank capable of playing with the world's big boys and promoting France's wider commercial interests.
But the manner of Mr Pebereau's bid suggests that the putative giant - Societe de Banque de Paris (SBP) is the working title - might break free once and from all from government influence on the banking sector. Mr Strauss-Kahn might welcome that in theory but is likely to be more doubtful about the implications in practice.
The creation of such a giant also reduces the government's options for the privatisation of Credit Lyonnais and might make some form of foreign stake in the recuperating, state-owned bank inevitable. Worse, it might have started a free-for-all in which large, foreign banks come looking for a wider share of the spoils, including, if Mr Pebereau fails, BNP itself. Once the taboo on hostile takeovers has been broken, anything could happen.
The signs are that the French government will do everything in its power to block the proposed merger. If so, the battle will be a bloody and instructive one, pitting the finance ministry and the Banque de France against France's second biggest bank and - in AXA - its most succesful financial institution.
That should show how much Colbertian power to intervene in the private economy the French government retains in this global, market-driven age.Reuse content